Determinants of Cattle Feeding Cost-of-Gain Variability

Volatility and seasonality of feed grain prices and cattle performance contribute to variability of steer feeding cost-of-gain. This study was conducted to determine the relative impacts of feed grain prices and cattle performance on cattle feeding cost-of-gain. Closeout data on 7292 pens of steers placed on feed from January 1980 through May 1991 in two western Kansas feedyards were investigated. Three different placement weight categories were studied on a pen basis. Regression analysis was used to determine the relative impact of corn (Zea mays L.) price, feed conversion, and average daily gain on cost-of-gain variability. Coefficients of separate determination were calculated to allocate the total explained cost-of-gain variability attributable to each of the three components. Together, corn price, feed conversion, and average daily gain explained 92 to 94% of cost-of-gain variability. Corn price explained 63 to 66% of cost-of-gain variability, feed conversion accounted for 25 to 29%, and average daily gain was responsible for approximately 2% of the volatility in cost-of-gain. Differences in the relative explanatory power of each of these three factors on cost-of-gain varied across the two feedyards. Seasonal patterns in cost-of-gain determinants were evident. Steers placed on feed from February through August had below average cost-of-gain, whereas late fall placements had costs-of-gain that were higher than average. Overall, results indicated that corn price risk had the largest impact on cost-of-gain variability. To the extent this risk can be managed, cost-of-gain variability could be controlled. Feed conversion was also an important consideration in cost-of-gain, however, its impact was roughly half as important as corn price. Research QuestionFluctuations in feeding costs and cattle performance contribute to volatility of steer feeding cost-of-gain. The principal objective of this study was to determine the relative impact of corn price and cattle performance on feeding cost-of-gain for steers. Seasonal patterns of each factor were also examined relative to the seasonal pattern of cost-of-gain over the period. Literature SummaryFew studies have examined cattle finishing cost-of-gain. Feedlot operators should know the most profitable rations and the resulting daily gain for a given set of feed ingredient prices to minimize costs. Simply minimizing feed ingredient costs for rations may not be adequate to minimize cost or maximize profits. Minimizing total feeding costs yielded the greatest profit per head in previous analysis, with minimizing ration costs and maximizing profit per day being the two next best alternatives of five different cattle finishing objectives. Examination of cost and revenue relationships of three groups of cattle indicated that the marginal cost per pound of muscle was lower when cattle were slaughtered at lighter weights. Feeding cattle until they grade Choice has been questioned as a practice that resulted in higher marginal costs-of-gain. Study DescriptionCloseout data on 7292 pens of steers placed on feed between January 1980 and May 1991 in two western Kansas feedyards were used in this analysis. Information collected from the closeouts included placement date, placement weight, days on feed, total gain, average daily gain, sale weight, feed conversion (as fed), processing costs, veterinarian charges, yardage charges, miscellaneous costs, feed cost, feed consumption (as fed), feeding cost per pound of gain, and slaughter date. Only pens of steers weighing between 600 lb and 899 lb were used by three different 100 lb placement weight categories. Applied QuestionsWhat are the relative impacts of fluctuating feed grain prices and cattle performance factors to steer feeding cost-of-gain? Corn price, feed conversion, and average daily gain explained 92 to 94% of volatility in cost-of-gain. As shown in Table 1, corn price explained 62.6% of the variability in cost-of-gain for steers placed on feed weighing between 800 and 899 lb and 63.4% of the variance in cost-of-gain for steers placed on feed weighing 600 to 699 lb. Feed conversion accounted for 26.5% of the cost-of-gain variability for steers placed on feed weighing 600 to 699 lb, and 29.0% of cost-of-gain volatility was explained by feed conversion for steers weighing 800 to 899 lb at placement. Finally, average daily gain explained 1.9 to 2.5% of cost-of-gain variance. The relative impacts of each cost-of-gain component also varied by feedyard. Do seasonal patterns exist in cost-of-gain and its components? Several cost-of-gain components exhibited seasonality. Steers placed on feed from February through August generally had below average real cost-of-gain (Fig. 1) and feed conversion rates, while the late fall placement months tended to be above average. Corn prices tended to peak in June before falling to yearly lows from September through December. Finally, rate of gain was generally better for steers placed in February through August. Table 1Percentage of total explained steer feeding cost-of-gain variability over time attributable to selected factors, by placement weight, January 1980 to May 1991. Placement weightExplanatory variable600–699 lb700–799 lb800–899 lb--------------- % --------------Yards combinedCorn price63.466.262.6Feed conversion26.525.329.0Avg. daily gain2.21.92.5Total explained†92.093.594.1Unexplained variability‡8.06.55.9Yard oneCorn price61.265.560.0Feed conversion35.030.935.9Avg. daily gain−0.1−0.00.6Total explained†95.596.296.4Unexplained variability‡4.53.83.6Yard twoCorn price72.269.768.7Feed conversion17.922.323.0Avg. daily gain3.42.52.8Total explained†93.694.494.5Unexplained variability‡6.45.65.5†Total explained variability is cost-of-gain variability explained by the explanatory variables. ‡Unexplained variability is 100 minus total explained. Fig. 1Seasonal index of real cost per cwt of gain, by placement weight, for steers placed on feed January 1980 through May 1991.